Obama warns of 2nd financial crisis

[Smallc]

The US is nowhere near the debt-to-GDP ratios that, say, Greece or Portugal are. I fail to see the connection you're trying to draw here.

Well, it is, but it's different. Places like Japan handle far more debt without default worries. The US will be fine for a very long time.

[Topaz]

The statement of the ONLY thing the US has to worry about is the devalue of its dollar and the rest of the world moving away from the US $ as world currency. True or false?

[GostHacked]

The statement of the ONLY thing the US has to worry about is the devalue of its dollar and the rest of the world moving away from the US $ as world currency. True or false?

I can agree with that. When oil is not traded in US dollars anymore, then that released the control of the oil market from the USA's hands. It's part of the reason to invade those countries like Iraq who wanted to trade oil with other countries under a different currency. That was one reason for the invasion of Iraq, because we know it's got nothing to do with terrorism or keeping America safe.

[Sir Bandelot]

I can agree with that. When oil is not traded in US dollars anymore, then that released the control of the oil market from the USA's hands. It's part of the reason to invade those countries like Iraq who wanted to trade oil with other countries under a different currency. That was one reason for the invasion of Iraq, because we know it's got nothing to do with terrorism or keeping America safe.

Iran wants to do the same thing.

[ToadBrother]

Well, it is, but it's different. Places like Japan handle far more debt without default worries. The US will be fine for a very long time.

It's not anywhere near it. Basically Greece's economic activity is incapable of generating enough cash to pay its interest on its sovereign debt (it's like a guy who has a credit card bill so high he can't even make minimum payments), hence it's sitting at the brink of insolvency. The US can still maintain a level of economic input that can handle its debt.

Edited June 23, 2011 by ToadBrother

[ToadBrother]

Iran wants to do the same thing.

I'm sure Iran wants to do all sorts of things, but it has an utterly trashed economy.

[Smallc]

It's not anywhere near it.

Well, the US is at 97% now, and Greece, at the start of the crisis, was at 110%. You're right though, the US, at this point, isn't in any kind of economic danger from debt. That doesn't mean that they don't have to fix the problem.

[WIP]

http://www.cbc.ca/news/world/story/2011/06/14/obama-debt-ceiling.html

I always get sick to my stomach when reading about this... The baby boomers are leaving quite the debt in this ponzi scheme of a society. The sad part is that the baby boomers will likely keep this up for the rest of their lives so that the younger generation can pay it back later. Being 27, much of my life will be spent supporting the artificially high standard of living that most my age will never experience on their own.

I'm twice your age, so my apologies for my personal contribution to the debt and other miseries that younger people are going to face in the future. My thinking is that our entire economy is one giant ponzi scheme that cannot be sustained much further into the future.

One example would be the building of suburbs, which at first enrich city coffers but leave them saddled with greater infrastructure costs over the next 50 or 100 years. New cities like Mississauga are doing fine, but in 50 years they will be in the same position as all of the older cities trying to maintain roads, water, sewer and garbage services.

I'm thinking that an economy based on continuous growth is bound to fail because of natural limits that economists have ignored for the past couple of centuries. Economists think of nature as a set of extractive subsectors of the economy - forests, fisheries, mines etc.. And the economy, not the biosphere, is seen as a whole, while nature is just a collection of parts.

Nature, however, doesn’t do bailouts, so at what point does growth actually become uneconomic?

That is, when the social, health, cultural, and environmental costs outweigh the “benefits” of further resource depletion. For a way out, I'm looking right now at an article by economist Herman Daly about how to create a "Steady State" economy posted on...of all places...The Oil Drum. I've come across a couple of articles proposing ways out of the mess of growth-based economics, I hope to get a thread up about them over the weekend.

[Bonam]

I always get sick to my stomach when reading about this... The baby boomers are leaving quite the debt in this ponzi scheme of a society. The sad part is that the baby boomers will likely keep this up for the rest of their lives so that the younger generation can pay it back later. Being 27, much of my life will be spent supporting the artificially high standard of living that most my age will never experience on their own.

Despite the occasional blips, the standard of living has been growing at an exponentially accelerating pace for hundreds of years. I'm 24, and I expect to have a standard of living far outstripping anything in the past. And, I pretty much already do. Many of the products and services I have access to today could not even have been imagined a mere decade ago. And a decade down the road, that will be true yet again. Technological progress trumps everything else.

That is, when the social, health, cultural, and environmental costs outweigh the “benefits” of further resource depletion. For a way out, I'm looking right now at an article by economist Herman Daly about how to create a "Steady State" economy posted on...of all places...The Oil Drum. I've come across a couple of articles proposing ways out of the mess of growth-based economics, I hope to get a thread up about them over the weekend.

A steady state society is a stagnant society. You can't have progress and innovation in a society that is in a steady state. Moreover, such a state could only be imposed from above, preventing people from improving their standard of living through free enterprise, thus eliminating the fundamental notions of freedom and the pursuit of happiness. This notion is as much anathema to me as communism.

[ToadBrother]

A steady state society is a stagnant society. You can't have progress and innovation in a society that is in a steady state. Moreover, such a state could only be imposed from above, preventing people from improving their standard of living through free enterprise, thus eliminating the fundamental notions of freedom and the pursuit of happiness. This notion is as much anathema to me as communism.

I'm trying to figure out how, in fundamentals, it's different from Communism.

[WIP]

Despite the occasional blips, the standard of living has been growing at an exponentially accelerating pace for hundreds of years. I'm 24, and I expect to have a standard of living far outstripping anything in the past. And, I pretty much already do. Many of the products and services I have access to today could not even have been imagined a mere decade ago. And a decade down the road, that will be true yet again. Technological progress trumps everything else.

Occasional blips! Where are the new technological innovations in agriculture for example? There has been nothing new to significantly advance crop yields in the last 40 years. If you think new inventions can pull a rabbit out of the hat, you're only fooling yourself. The only way you will have a standard of living outstripping anything in the past, is if you are part of that fortunate minority at the top of the economic pyramid.

But, the fundamental problem that Herman Daly was addressing is how do you keep increasing consumption and economic growth when there is conclusive evidence from studies on resource depletion, land and environment degradation, and water shortages, that the world economy has hit natural limits imposed by the Earth's biosphere. Economic theory is worthless if it doesn't address these kind of real world problems.

A steady state society is a stagnant society. You can't have progress and innovation in a society that is in a steady state. Moreover, such a state could only be imposed from above, preventing people from improving their standard of living through free enterprise, thus eliminating the fundamental notions of freedom and the pursuit of happiness. This notion is as much anathema to me as communism.

Economic proposals like steady state economics or another alternative called "resource-based economics" may end up in economic stagnation, but what is the alternative? The vast majority of people have been living with economic stagnation for more than 10 years now. Economists and politicians try to play games with the numbers...such as omitting food and gas prices from inflation numbers, but who are they kidding?

A decline in production and resource use could be managed without negatively impacting most peoples' lives, if we consider that the chaotic, impulse-driven consumer demand for products does a piss poor job at teaching consumers the difference between frivolous desires and real essentials. A lot of people are motivated to go in debt to buy the right car, or the right clothes, without putting any logical thought into whether they have a real, or imagined need. When it comes to city-dwellers, there is no need to own a car if you live in a city with a decent public transit system. If public transit was improved....even to the level it was at prior to WWII and the highway lobby eviscerated transit to increase car ownership...the automobile would be a luxury, rather than a necessity, and there would be a large drop in energy demand without decreasing the quality of life.

[Michael Hardner]

Occasional blips! Where are the new technological innovations in agriculture for example? There has been nothing new to significantly advance crop yields in the last 40 years. If you think new inventions can pull a rabbit out of the hat, you're only fooling yourself. The only way you will have a standard of living outstripping anything in the past, is if you are part of that fortunate minority at the top of the economic pyramid.

What's significant ? The Wiki page on agricultural productivity seems to show at least 25% growth *per capita* since 1961 ?

But, the fundamental problem that Herman Daly was addressing is how do you keep increasing consumption and economic growth when there is conclusive evidence from studies on resource depletion, land and environment degradation, and water shortages, that the world economy has hit natural limits imposed by the Earth's biosphere. Economic theory is worthless if it doesn't address these kind of real world problems.

I agree that there are external costs that are absolutely excluded today. For some things, it almost seems like the market is ready to blindly drive off the figurative cliff. My understanding is that we're running out of helium, but the market is only slowly adjusting prices. There are still lots of kids balloons to fill with helium, even though that gas is used in MRIs.

That experience may wake people up.

A decline in production and resource use could be managed without negatively impacting most peoples' lives, if we consider that the chaotic, impulse-driven consumer demand for products does a piss poor job at teaching consumers the difference between frivolous desires and real essentials. A lot of people are motivated to go in debt to buy the right car, or the right clothes, without putting any logical thought into whether they have a real, or imagined need. When it comes to city-dwellers, there is no need to own a car if you live in a city with a decent public transit system. If public transit was improved....even to the level it was at prior to WWII and the highway lobby eviscerated transit to increase car ownership...the automobile would be a luxury, rather than a necessity, and there would be a large drop in energy demand without decreasing the quality of life.

There are many other examples like that. If soda cost twice as much, people would drink half as much. And this is a bad thing because...

[WIP]

What's significant ? The Wiki page on agricultural productivity seems to show at least 25% growth *per capita* since 1961 ?

Those productivity gains are through the increased use of fertilizers, pesticides and GMO hybrids....there's the only example of something new...being used in third world nations. Productivity does not equal technological innovation, and the increased productivity in India and China has come at a very high cost - extensive land degradation and decline in available fresh water. link link

[Michael Hardner]

Those productivity gains are through the increased use of fertilizers, pesticides and GMO hybrids....there's the only example of something new...being used in third world nations. Productivity does not equal technological innovation, and the increased productivity in India and China has come at a very high cost - extensive land degradation and decline in available fresh water. link link

Aren't those things technical innovations?

[Shady]

One has to love the irony of a President warning of a 2nd financial crisis, while at the same time pursuing policies that add to the likelyhood of said crisis.

It's also rather rich for him to warn about a crisis, while sitting out of the necessary negotiations going on.

[sharkman]

It's all part of his "blame the Republicans" strategy. They'll be ramping it up as the deadline to raising the debt ceiling approaches. It's beginning to seem like the driving force behind the recovery was nothing more than Obama's spending on money borrowed from China. And now that it's running out, the real state of the economy can't be hid.

[GostHacked]

One has to love the irony of a President warning of a 2nd financial crisis, while at the same time pursuing policies that add to the likelyhood of said crisis.

It's also rather rich for him to warn about a crisis, while sitting out of the necessary negotiations going on.

Not to mention getting the US involved in more unneeded wars.

[WIP]

Aren't those things technical innovations?

Food production has been falling steadily all around the world, and there hasn't been anything new developed to increase crop yields since the green revolution. Now, even if someone does cook up something in a lab to pull a rabbit out of the hat, it has to be impressive enough to make up for increasing losses caused by topsoil loss and land degradation, and declining availability of water for irrigation....and of course this all has to be done to accommodate an increasing world population that will reach 7 billion sometime this fall -- so what are you basing your optimism on...besides ideology?

[Michael Hardner]

Food production has been falling steadily all around the world, ...

I just posted a link showing production per capital increasing. Please explain.

[GostHacked]

I just posted a link showing production per capital increasing. Please explain.

Well, record floods and droughts in multiple food producing countries has taken a huge hit this year for total food production. Russia won't export wheat anymore because they need it themselves, and that's still not enough to keep them going.

Most farms should be into their second crops of the year. Many have not been able to plant their first crop. The result seems pretty obvious to me.

[WIP]

Not to mention getting the US involved in more unneeded wars.

And that's exactly why America needs a real opposition party that represents the majority's wishes: end the wars, tax the rich, a public option for health insurance etc.. What they've got is two political parties that represent the money. Whoever visits their offices with cheques in hand, gets their attention. The only concern they have about the public is how to fool enough people to vote for them during the next election cycle. Democrats do it by pretending they're weak "reforms" are the best that can be achieved for the people; while Republicans do it by demagoging social issues.

An interesting new wrinkle to add to the mix is having a Democrat like Andrew Cuomo play the social issues card from the opposite side....which is a fascinating enough story to start a new thread for: link

[bush_cheney2004]

And that's exactly why America needs a real opposition party that represents the majority's wishes: end the wars, tax the rich, a public option for health insurance etc..

Since the majority of Americans actually vote for Democrats or Republicans, this is wishful thinking at best. You already got your wish with the NDP in your own nation....have fun with that!

[ToadBrother]

Since the majority of Americans actually vote for Democrats or Republicans, this is wishful thinking at best. You already got your wish with the NDP in your own nation....have fun with that!

But, like most first-past-the-post jurisdictions, it only happened at the expense of one of the "natural governing parties", which now sits at a distant third.

[sharkman]

And the real reason Obama is fearmongering about another crisis is:

He's doing so badly in various polls and approval ratings that even he realizes the people are turning on him. Expect a whole lotta finger pointing from him this summer in between fundraising events in which he scares and squeezes rich Dems. Oh, and the MSM will still think he walks on water.

[Oleg Bach]

His latest speech went around in circles ....tons of filler with no real content. Feeble attempt at gaining the confidence of the poorest of voters by implying that he will force the rich to pay - which he will not. When someone in Obamas' position forwarns of a finacial crisis - what he is really doing is applying some numbing opiate cream to the lower orifice of the lowest and poorest people...In eccense - we are coming to rob you again so be prepared and it will not hurt a bit. When you have most of the wealth world wide now in the hands of a tiny minority - You have to push the slaves a little harder to maintain the status quo - Greece is a prime example - the modern slave is now like an ageing horse that should be put out to pasture but now is driven till it drops...To take away pensions and deplete the retirement funds to maintain a super upper class is obscene.